China Evergrande set to collapse as deadlines loom


With more than $418b in debts, the property developer is dealing with several looming deadlines to pay up, as attempts to save it fall through

China Evergrande has been teetering on the brink of collapse for weeks but the country’s second biggest property developer, could be facing up to doomsday as it admitted it may not be able to meet its financial obligations.

With more than $418b in debts, the property developer is dealing with several looming deadlines to pay up, as attempts to save it fall through.

An offshore bond payment that China Evergrande initially missed on September 23, but got a 30-day grace period on, is set to expire on Saturday with $110 million owing.

There’s another $60m interest payment too, which wasn’t paid when due on September 29, and the grace period is also set to run out.

Discussions for a $5.24b deal for Hong Kong-listed Chinese developer Hopson to take a majority stake has also fallen through.

Credit rating service Moody’s has basically given the property developer a junk rating, warning that there are weak recovery prospects for Evergrande’s creditors if there is a default.

Experts believe that China Evergrande’s collapse is all but inevitable.

The Chinese government has been reluctant to bail out the ailing property developer and the People’s Bank of China governor Yi Gang has claimed the risk to the economy could be contained.

Yet there are 70,000 investors in Evergrande, which has also paused construction on homes for more than 1 million home buyers.

Clifford Bennett, chief economist at ACY Securities, warned that China has moved further along the US style global financial crisis (GFC) pathway.

China uses the property market to prop up the economy with nearly a third of gross domestic product coming from the industry. Recently, two other Chinese developers, Sinic and Fantasia, have also defaulted on payments.

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